Borrowing

In the same way that property buyers pay attention to a lender’s rate, lenders cast a beady eye over their potential customer’s credit rating.

They will check if you have ever been late with a payment, whether it be a mortgage repayment or payment on a bill or some other debt. If so, and it happened less than five years ago, you may have a black mark against your name.

Check with the agencies

Not every instance will have been recorded, but it may pay to check with credit rating agency Baycorp Advantage to see if you have a clean bill of health. There’ll be a charge for a copy of your personal credit record if you need it within 24 hours – otherwise it’s free.

If you don’t have the time to sort through the myriad lenders and home loans out there, you might want to speak to a mortgage broker.

Be aware, though, that not every broker has every lender or loan on its list, so it pays to still do some of your own research. Test their recommendations against other loans you’ve investigated. Many of the cheapest loans are not sold through brokers.

Also, some brokers charge a fee for their services while others accept commissions from lenders. You’ll want to ensure that any recommendation is truly independent, and that fees don’t wipe out the better mortgage deal you think you’ve achieved.

Non-conformists

Some people don’t qualify for a conventional home loan for various reasons, including a poor credit history. In this event, one option is to visit a so-called non-conforming lender.

Non-conforming lenders don’t rely on the computerised credit scoring methods widely used by mainstream lenders. Instead, they assess each borrower on his or her merits, looking at factors such as employment, income, repayments record and overall credit history. Some are more rigorous than others.

Carefully weigh up the pros and cons of using a non-conforming lender. They usually charge a higher rate of interest to compensate for what is perceived to be the higher risk and that could amount to thousands of dollars over the life of a loan. These lenders usually also impose stricter repayment conditions.

Get back on track

Then again, one or two years of making payments on time will help you establish a good credit record, allowing you to have another go at securing a conventional loan elsewhere.

A subset of this category is the low-doc loan (where borrowers don’t have to go to the same lengths to substantiate their income). These loans are aimed at self-employed people who can’t easily – or don’t want to – substantiate their income.

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